Unit 2 Business Communication And Development
2.1 Show macro and micro environmental factors which influence marketing decisions of Sainsbury’s
There are two kinds of external marketing business environments; micro and macro. These environments’ factors are beyond the control of marketers but they still influence the decisions made when creating a strategic marketing strategy. Sainsbury’s runs its operation in its business environment that is classified as macro and micro environment which have significant influence on marketing decisions. (Linkedln Corporation, 2015)
Micro Environment Factors
The suppliers can control the success of the business when the suppliers hold the power. The supplier holds the power when the suppliers are the only or the largest supplier of their goods; the buyer in not vital to the supplier’s business; the supplier’s product is a core part of the buyer’s finished product or business.
The customers – who the customers are (B2B or B2C, local or international) and their reasons for buying the product will play a significant role in how the someone approaches the marketing of its products and services to them.
The resellers if the product the organisation produces is taken to market by third party resellers or market intermediates such as retailers, wholesalers, then the marketing success is impacted by those third party resellers. For example, if a retail seller is a reputable name then this reputation can be leveraged in the marketing of the product.
The competition – those who sell same or similar products and services as individual’s organisation are its market competition. Price and product differentiation play an important role in order to competition advantage.
The general public – an organisation has a duty to satisfy the public. Any actions of the company must be considered from the angle of the general public and how they are affected. The public have the power to help the organisation to reach its goals; just as they can also prevent the organisation from achieving the goals as well.
Macro Environment Factors
There are many factors in the macro-environment that will affect the decisions of the Marketing managers of any organisation. Tax changes, new laws, trade barriers, demographic change and government policy changes are all examples of macro – change.
Political factors – These refer to government policy such as the degree of intervention in the economy. What goods and services does a government want to provide? What extent does it believe in subsidising firms? What is its priorities support? Political factors can impact on many vital areas for business and products to the market.
Economic factors – these include interest rates, taxation changes, economic growth, inflation and exchange rates. For example, higher interest rates may deter investment; a strong currency may make exporting more difficult because it may raise the price in terms of foreign currency; inflation may provoke higher wage demands from employees and raise costs; higher national income growth may boost demand for a firm’s products and these need to be taken into account in pricing decisions.
Social factors – changes in social trends can impact on the demand for a firm’s products and the availability and willingness of individuals to work. In the UK, for example, the population has been ageing and these impact on product and distribution methods.
Technological factors – new technologies are new products and new processes. MP3 players, computer games, online gambling and high definition TVs are all new markets created by technological advances. Online shopping, bar coding and computer aided design are all improvements to the way people respond to the marketing offer as a result of better technology.
Environmental factors – environmental factors include the weather and climate change. Changes in temperature can impact on many industries including farming, tourism and insurance. With major climate changes occurring due to global warming and with greater environmental awareness this external factor is becoming a significant issue for firms to consider and these impact on packaging choices and fairtrade..
Legal factors – these are related to the legal environment in which firms operate. In recent years in the UK there have been many significant legal changes that have affected firms’ behaviour. The introduction of age discrimination and disability discrimination legislation, an increase in the minimum wage and greater requirements for firm to recycle are examples of relatively recent laws that affect an organisation’s actions. Legal factors can affect a firm’s cost if new systems and procedures have to be developed and demand if law affects the business relationships.(O. Rokr, 2015)
2.2 Propose segmentation criteria to be used for products in different markets
Segmenting a market refers to the process of dividing a market into smaller sub-groups based on some key defining characteristics of consumers. There are two types of markets: consumer market and organisation market. Consumer market is to sell products or services to individual buyer for its own or family use. However, an organisation/industrial market involves the sale of goods or services between businesses. There are five criteria in consumer market segmentation: behavioural, psychographic, geographic, demographic and geo-demographic; and there four criteria in industrial market segmentation (3macro + 1 micro), they are: Usage, size, location and industry.
Therefore, McDonald should decide to segment a market in a number of ways, such as by geographical region, age, and income. McDonald’s CEO suggested market segmentation based on broad two step classifications of macro-segmentation and micro-segmentation. This model is one the most common methods applied in retail markets today.
Segmentation divides buyers into groups with similar needs and wants and it allows for a better allocation of a firm’s finite resources. Segmenting a market is demanded by the organisation that manufactures goods or provides services in order to help it deal with the group rather than each individual. There are five criteria for Customer market segmentation, namely psychographic, behavioural, geographic, demographic and geo-demographic.
Behavioural segmentation divides the market into groups based on their knowledge, attitudes, uses and responses to the product. Behavioural segments can group consumers in terms of occasions, usage loyalty, benefits sought.
Psychographic segmentation is about marketing strategy in which customers are divided into different group based on lifestyle. The approach defines various demographics that helps marketers understand what influences purchase decisions such as different attitudes and expectations.
Profile segmentation generates accurate and precise customer information system that can increase your organisation’s effectiveness. Information may be useful in a large variety of circumstances. For example, someone can use segmentation to define certain customer issues such as characteristics of your target customers, customer lifestyle characteristics, where more of these customers live, and strategies for marketing your products and services.
Examples of common characteristics are: interests, lifestyle, age gender, and the common types of market segmentation include: geographic, demographic psychographic and behavioural. Price can be used in two different segments such as demographic and psychographic. For example, bus and train tickets cost less for young people from 7 to 17 years old (demographic), and they cost more for social class or lifestyle (psychographic). (J.Riley, 2012).
There are four criteria for Industrial market segmentation, namely location, size, usage and industry. Location is about the areas where businesses are, while size determines orders. Industry is a clear indication of specificity while knowing usage helps to merge orders.
Geographic location is equally as feasible for McDonald. It tells McDonald a lot about culture and communication requirements.. Geographic location also relate to culture, language and business attitudes. Benefit segmentation is the product’s economic value to the customer (Hutt & Speh, 2001) is one of the most helpful criteria in Sainsbury’s. It recognises that customers buy the same products for different reasons, and place different values on particular product features.
Segmenting Consumer Market Diagram below
2.3 Choose a targeting strategy for a selected product/service
Targeting strategy means how a business selects potential customers to whom it wishes to sell its products or services. The targeting strategy requires segmenting the market, choosing which segments of the market are appropriate, and determining the products that will be offered in each segment.
In general organisations produce different products and services for certain group of people or customers. Sainsbury’s may follow different targeting strategies like differentiated or selected marketing, niche, concentration marketing and mass, undifferentiated marketing. In niche marketing Sainsbury’s chooses certain group of people as its customers from all people. Economic recession has negative impact on niche marketing
Sainsbury’s conducts its marketing only for its target groups. Generally Sainsbury’s follows mass marketing where it produces goods and services in huge volume and sells goods in reasonable prices and does little profit per product because a huge will turn out huge profit. Sainsbury’s conducts marketing for all segments of the market. In differentiated marketing strategy, Sainsbury’s concerned with targeting each segment with a product with its own marketing mix designed to match the needs of the customers within the segment. In this process Sainsbury’s can increase customer satisfaction and customer loyalty and allow Sainsbury’s to spread risks.
Differentiated marketing creates a special product that is different from other products in order to help a business to gain competitive advantages over its competitors. A company can choose two different strategies: differentiation and differentiation focus.
Focused marketing it is a form of marketing that requires the marketing managers to carefully study their organisation so as mirror its position in the market because without a plan for focused marketing, it would be impossible for any business to grow and profit.
Customised marketing is tailoring a particular product to the specific needs of an individual customer, and it is generally practiced by companies whose products are unique and the product can be designed to suit the special needs of each customer. Since the company is considered to be the final form of target marketing.
For example, McDonald’s uses an undifferentiated targeting strategy since as a Marketer; it does not pay attention to the apparent segment differences that exist within the market and attempts to appeal to the whole market with a single basic product line and marketing strategy. Certain types of items such as chicken and soft drinks can be taken as an example, targets drivers or owners car with the same products. McDonald’s targets people who do not have enough time to spend at eating, such as workers, travellers, students, and tourists and does not make any difference to whoever it sells its standard products to.
2.4: How buyer behaviour influences and affects marketing activities in different buying situations
Organisational marketing activities hugely depend on the buying behaviour of the customers. Customers may become extremely involved or lowly involved with organisational products and services and it depends on tangible and intangible value of the products. Usually there are four types of buying behaviours:
Dissonance buying behaviour – customer are extremely involved here but there are only few products options in the market like floor tiles at affordable prices.
Complex buying behaviour – here customers are greatly involved and they spend a lot of time before buying the products and services. Usually these products are precious and customers ask others or expertise before buying products. These products have major impact on customers; for example buying gold thus influencing the product offer..
Habitual buying behaviour – these customers have low involvement and there are too much of same quality products available in the market but those products are very essential for our everyday life products and prices like chicken, fish, tomato, breads or drinks.
Variety seeking behaviour – these customers have low involvements and there are too much of options for same type of product. Customer may check those products at different channels thus affecting place. For example, there are lots of fragrances in the market and people may buy different fragrances in different times only for variety. Manufacturers have to offer different offers to customers to sell their product and to attain competitiveness.
(Johny, 2011). Consumer buying situation – consumers are who buy the product for personnel needs. McDonald delivered daily used different products to attract the customers with suitable price. The decision-making process by which formal organisations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers (Kotler & Armstrong, 1989). Buying behaviour thus, is made up of the internal and external factors that show why consumers buy and use certain products or services and Organisations then respond to it with their products and services. This type of behaviour can affect the marketing strategy that business employs to promote its products and its mix, and when this behaviour is analysed, it might not have originally used. Organisations then create a marketing mix suited to the different types of buying behaviour and to customers with different needs and wants and related to cultural, social, psychological and personal factor. For example McDonalds in Islamic countries, they do not use pig meat in their recipes. (Crystal Vogt, 2015)
2.5: Explain Positioning and discuss what changes when Marketers propose a new positioning for a given product/service.
Positioning is the strategy of an organisation for conveying what makes its company or products excellent, different or better than those offered by competitors. So differentiation is essentially the way the organisation carries out its positioning by promotion distinct attributes or benefits that the organisation offers. Positioning can be by image repositioning, this means no change to product but promo used to change image. Product repositioning, there will be modification to product and brand. Intangible repositioning can be when marketers target a different segment with same product. Tangible repositioning means that the marketer changes both product and market. (Lynn Lauren, 2015)
Positioning strategies involves the various ways and means that marketers utilise to develop an image on the firm, its products or services in the mind of their customers or consumers. Product positioning is a marketing technique intended to present products in the best possible light to different target audiences. Market segmentation and product position is correlated and Sainsbury’s establishes product positioning according to the product segmentation. In positioning, Sainsbury’s creates message concerning its products and deliver the message to target customer through different mediums such as leaflet, magazines, television, and radio. The message includes manipulation and symbol and the success of product positioning largely depends on the technical experts, expert advice, fast service, creative ideas, high quality, caring attitudes, immediate results, low price and emotional supports. (Lynn Lauren, 2015)
The marketers can propose and change positioning strategies for a market segment. The first step in changing their positioning strategies is market research and the use of management tool called SWOT will help them to identify their strengths, weaknesses, opportunities, and threats.
Repositioning is the changing of brand image to hold a new position in the eyes of customers. This means to change your previous position (low quality) to the high quality where the company is now in the customer mind. For example KCF was called Fried Chicken and has repositioning its position by giving a new name. Also, another reason to repositioning a company could be related to the price. For example, a premium brand of shampoo sold at relatively high price with advertising that emphasises its superior performance may need to be repositioned as customers become more sensitive about prices. Sometimes the original positioning of a product does not stimulate the interest of consumers. Other times, the original positioning was successful, but the target market of that position has become saturated and companies need to find new ways to feed growth. In those instances, repositioning may be the solution. Repositioning does not need to be a dramatic overhaul of a product. It certainly can be, like when Dr. Pepper gave Diet Dr. Pepper a new label and new name – Dr Pepper Ten – and advertised it s “mean’s drink,” If someone saw the advertisements for Dr Pepper Ten, there was no doubt in its mind that it was positioned as a low calorie soda that men can be comfortable drinking. When re-positioning, marketers should make sure that they de-programme customer perception of old positioning and re-programme the new position. For example, in the 1980s, Hyundai started selling its vehicles in the United States. Its first model, the Excel was positioned as a low cost solution for budget – conscious buyers. To help ease concerns that low price meant cheap quality, Hyundai offered the longest warranties in the auto industry at all time. Its original position was successful, and sales in the United States grew quickly, but the marketing leaders at Hyundai did not want to be known as the cheap car company forever. (Douglas Hawks, 2015). Order Now